Pinnacle West Earnings Beat Ests by a Penny


Pinnacle West Capital Corp. (PNW) reported adjusted earnings per share of 14 cents which declined 36.4% from the year-ago quarter. Earnings nominally beat the Zacks Consensus Estimate of 13 cents.

The earnings downturn in the reported quarter was due to unfavorable weather in its service territories and lower transmission revenues.

Total Revenue

Quarterly revenue was $686.3 million, down 0.1% from the year-earlier period. Revenue in the reported quarter also fell short of the Zacks Consensus Estimate by 2.4%. The revenue downturn was attributable to declining electricity sales volume from the company’s retail segment.  

Operational Highlights

Total regulated electricity delivered in the quarter fell 1.7% to 6,862 Gigawatt-hours (GWh) from 6,978 GWh in the year-ago quarter.

During the quarter, retail electricity sales decreased 6.5% to 5,612 GWh from 6,001 GWh a year ago. The decline was due to lower electricity consumption by business as well as residential customers.

On the cost side, fuel and purchased power costs climbed 8.3% to $249.8 million from the year-ago quarter. The company’s operations and maintenance (O&M) expenses however decreased 4.6% year over year to $212.9 million due to a decline in employee benefit costs.

Operating income dropped 13.5% year over year to $75.2 million in the first quarter. The cost increase combined with lower revenues ate into profitability.

Financial Condition

As of Mar 31, 2014, Pinnacle West’s cash and cash equivalents were $103.4 million versus $9.5 million as of Dec 31, 2013.

Long-term debt as of Mar 31, 2014, was $3,045.6 million compared with $2,796.5 million as of Dec 31, 2013.

The company generated $249.2 million in cash from operations during the quarter, increasing 17.4% year over year.

Capital expenditure increased 13.4% year over year to $207.5 million.


Pinnacle West estimates earnings in 2014 in the band $3.60-$3.75 per share. Retail customer growth is anticipated to be about 2.0%. Operating expenses are expected in the range of $790 million to $810 million.

Other Utility Company Releases

Xcel Energy Inc. (XEL) posted earnings per share of 52 cents, exceeding the Zacks Consensus Estimate of 50 cents.

TECO Energy Inc. (TE) reported first quarter 2014 earnings of 23 cents per share, edging past the Zacks Consensus Estimate of 22 cents.

NextEra Energy Inc. (NEE) reported pro forma earnings of $1.26 per share, beating the Zacks Consensus Estimate by 15.6%.

Our View

Pinnacle West reported unimpressive financial results in the first quarter 2014 with revenue trailing and earnings barely managing to clear our expectations. The colder-than-normal weather in Arizona hit power demand which drove down sales.

However, the coming summer months could drive Pinnacle West’s sales. In addition, the company’s effort to seize the growing opportunities in the solar market through its large-scale AZ Sun program will bode well for future growth.

Pinnacle West presently carries a Zacks Rank #3 (Hold).

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